Measuring Persistence of U.S. City Prices: New Evidence from Robust Tests

This paper revisits the empirical analysis in Cecchetti, Mark and Sonora (2002) involving long-span U.S. city prices, who estimated the persistence of U.S. price differentials to be around nine years. After controlling for the structural breaks in the data, we find that U.S. city price level differentials are I(0) stationary processes with the median half-life of convergence ranged between 1.5 and 2.6 years, estimates that are in accordance with what should be expected from a highly integrated economy as the United States. Our results are also robust to a pairwise tests of price level convergence.